May 8, 2008
Judge Rejects Countrywide Plan to Settle Suit on Foreclosure Bid
Bankruptcy Judge Thomas Agresti rejected Countrywide Financial Corp.'s proposal to settle accusations that it fabricated evidence used in a bid to foreclose on a home, saying he wants to know more about the alleged false documents, the Wall Street Journal reported today. Judge Agresti on Tuesday dismissed the company's request to settle a dispute with Sharon Diane Hill, a Pittsburgh-area woman who was threatened with foreclosure by the country's largest home lender. Hill was up to date on her payments, but Countrywide threatened to take her home if she didn't pay thousands more in fees, according to court documents. It later backed off and offered to pay her lawyers. However, Hill said that her credit was permanently marred by the foreclosure attempt. Details of the settlement proposal were filed under seal, which Judge Agresti said was unjustified. He also said the settlement documents were deficient because they failed to reveal what Hill's lawyers found out about the alleged fabricated evidence. Read more. (Registration required.)
Bush's Threat Provokes House Skirmish on Housing Bill
Emboldened by President Bush's threat to veto a Democratic plan to help homeowners in danger of foreclosure, House Republicans threw up repeated roadblocks to delay debate of the legislation yesterday, prompting an argument between party leaders over procedural tactics, the New York Times reported today. House Democrats, led by Financial Services Committee Chairman Representative Barney Frank (D-Mass.), had been hoping to build a bipartisan consensus on the housing legislation, which would widen the availability of federal-insured mortgages to help troubled borrowers refinance their loans. As Democrats tried to bring their bill to the floor yesterday, House Republicans threw up procedural roadblocks, including a series of votes on motions to adjourn. Read more. (Registration required.)
U.S. Consumer Debt Rises More Than Forecast in March
U.S. consumer borrowing jumped more than double the amount economists forecast in March, indicating that a slowing economy is forcing Americans to accumulate credit card and other forms of debt, Bloomberg News reported yesterday. Consumer credit increased by $15.3 billion for the month to $2.56 trillion, the biggest monthly rise since November, the Federal Reserve reported yesterday. In February, credit rose by $6.5 billion, previously reported as an increase of $5.2 billion. The Fed's report doesn't cover borrowing secured by real estate, such as home-equity loans. The March figures brought U.S. consumer borrowing in the first quarter to $34 billion, the most since the first three months of 2001, when the economy entered its last official recession. Read more.
President Bush Signs Bill to Secure Student Loans
President Bush yesterday signed a bill into law aimed at ensuring that students' access to their federal college loans remains open and secure even when lenders struggle to stay afloat, Bankruptcy Law360 reported. Supporters of the 'Ensuring Continued Access to Student Loans Act of 2008' are looking to the measure to put up barriers to protect students from the effects of future crises in the credit markets. A downturn in the credit market last year sent a number of lenders into bankruptcy. The measure would increase the annual limit on federal college loans by $2,000 for all students and raise the cap on total loans for a student's entire education to $31,000 for dependent undergraduates and $57,500 for independent undergraduates. Read more. (Registration required.)
Ziff Davis Offers Revised Chapter 11 Plan
Ziff Davis Media Inc. filed its second amended joint plan and third amended disclosure statement on Tuesday in the U.S. Bankruptcy Court for the Southern District of New York only a week after filing the first plan and second statement, Bankruptcy Law360 reported yesterday. Under both plans, Class 4 claimants Ð comprising holders of senior secured notes and notes given to MHR Institutional Partners III LP Ð will receive a 90 percent pro rata portion of the stock, while Class 5 claimants, which hold subordinated and stub notes, will get the remaining 10 percent. Where the previous disclosure statement had said it had been agreed to by the debtors and the ad hoc senior secured noteholder group, the new plan has the support also of the unsecured creditors' committee, the MHR noteholders and other parties. In addition, the amended plan extends the franchise for plan confirmation beyond allowed claimants in voting classes to unallowed claimants, who are now entitled to a $1 ballot. Read more. (Registration required.)
Delta and Northwest Defend a Merger
The chief executives of Delta Air Lines and Northwest Airlines yesterday defended their plans to merge, telling a Senate subcommittee that the consolidation was essential to preserve jobs and service to small cities, and to compete with foreign-flag carriers, the New York Times reported. However, members of the subcommittee on aviation were generally skeptical about the economic prospects of the merged airline and the ailing industry in general. Delta and Northwest agreed in mid-April to a $3.1 billion deal that would create the world's biggest airline. Referring to soaring oil prices, Sen. Byron L. Dorgan (D- N.D.) said that even after a merger, 'you're still going to run fuel through your planes.' Sen. John Thune (R-S.D.) said that it appeared that the airlines were losing money on each ticket and trying to make up for the losses on volume. Read more.
SEC to Make Banks Reveal Capital, Liquidity Levels
The U.S. Securities and Exchange Commission will require investment banks to disclose their capital and liquidity levels after the agency was criticized for regulatory failings in the wake of the Bear Stearns Cos. collapse, Bloomberg News reported yesterday. 'One of the lessons learned from the Bear Stearns experience is that in a crisis of confidence, there is great need for reliable, current information about capital and liquidity,' SEC Chairman Christopher Cox said yesterday. 'Making that information public can certainly help.' The SEC is re-evaluating its oversight of securities firms after the Federal Reserve had to help rescue New York-based Bear Stearns in March to prevent a market panic amid a worldwide credit contraction. Concern that Bear Stearns was running short of cash prompted customers and lenders to desert the firm in March, forcing it to accept a takeover by JPMorgan Chase & Co. Data on capital and liquidity will be required this year 'in terms that the market can readily understand and digest,' Cox said. The SEC already collects much of this information without giving it to the public, he said. Read more.
Senate Panel Opens Debate on Stronger SEC Enforcement
Two former SEC chairmen called on Congress today to significantly beef up the agency's enforcement authority and resources in the wake of the crash of credit markets and the home loan foreclosure crisis, CongressDaily reported yesterday. In testimony before the Senate Banking Securities Subcommittee, former chairmen David Ruder and Arthur Levitt agreed that federal regulatory agencies overseeing the markets were asleep at the switch as financial innovators -- among them the investment bank Bear Stearns -- gambled with shaky investments in mortgage-backed securities. 'We had a runaway marketplace,' Levitt said, 'where leverage and greed trumped the efforts of the [regulatory] gatekeepers, auditors and regulators. Both of the former chairmen urged Congress to move smartly and deliberately to find out exactly what happened to trigger the situation and take steps to strengthen the ability of federal regulatory authorities to prevent a relapse of the practices by mortgage brokers and dealers, packagers of mortgage securities, investment banks and holding companies that apparently conspired, to varying degrees, in the crash. Click here to read the prepared testimony from the Senate Banking Securities Subcommittee hearing. Read more.
Firm Helps Manage Risky Assets of Others in Distress
Under the aegis of the Fed, money management company BlackRock is managing $30 billion of hard-to-sell assets from Bear Stearns, part of the central bank's unprecedented deal with JPMorgan Chase under which JPMorgan took control of the investment bank, the New York Times reported today. In Washington, D.C., some regulators and lawmakers question the arrangement, saying it puts taxpayers' money at too much risk. BlackRock's funds have largely dodged the crisis in the subprime mortgage market. BlackRock was among several Wall Street firms that advised the Treasury late last year on a controversial plan to shore up certain bank-affiliated investment vehicles. Just this week, BlackRock agreed to manage risky subprime assets with a face value of $22 billion from UBS, the ailing Swiss bank. Read more. (Registration required.)
International
Canadian Court Considers Finance Extension for Pope & Talbot
A Canadian bankruptcy court was asked yesterday for a further extension of creditor protection for bankrupt wood products company Pope & Talbot Inc., which is preparing to shut its three remaining pulp mills that employ nearly 1,000 workers in British Columbia and Oregon, the Seattle Times reported today. The Portland, Ore.-based company, which has most of its operations in British Columbia, had been given a 48-hour extension yesterday by the court, giving it more time to seek a new buyer for the mills after a deal to sell them to an Asian firm fell through last week. The company's creditors have refused to provide financing to keep the mills alive. Some stakeholders asked the court for a further extension to Friday, while others opposed the move. Read more.